Enforcement proceedings in dominance in Portugal

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The responsibility for enforcing the competition regime rests with the Competition Authority.

The Authority is a public entity endowed with administrative and financial autonomy, which has been granted statutory independence to perform its activities, without prejudice to the competence of the government as regards competition policy.

The Authority has extensive powers of investigation and inspection. Among other powers, it can, notably:

• question the concerned undertaking and other persons involved, personally or through their legal representatives, and request from them documents and other data deemed convenient or necessary to clarify the facts;
• question any other persons, personally or through their legal representatives, whose statements are considered relevant, and request from them documents and other data;
• carry out searches, examinations, collection and seizure of extracts from accounting records or other documentation at the premises, lands or transportation means of the undertakings or associations of undertakings (this action requires a decision from the competent judicial authority, a judge or the public attorney, issued upon an Authority’s substantiated application);
• during the period strictly required for the foregoing measures, seal the premises and locations of the undertakings or associations of undertakings where accounting records or other documentation, as well as supporting equipment, may be found or are likely to be found (this action requires a decision from the competent judicial authority, a judge or the public attorney issued upon an Authority’s substantiated application); and
• request from any public administration services, including police authorities, the assistance that may be required for the performance of the Authority’s functions.

If there are reasonable suspicions that in the domicile of shareholders, members of the board of directors or employees of undertakings or associations of undertakings there is evidence of serious infringements to the provisions of the Act on restrictive practices or abuses of dominant position, or to articles 101 0r 102 of the TFEU, domicile searches may be carried out by the Authority if previously authorised by a judge upon request from the Authority. If the search is carried out in an attorney-at-law’s office or in a doctor’s office it must be made, otherwise being null, in the presence of a judge who previously informs the president of the local section of the Bar Association or of the Doctors’ Association, as applicable, so that this latter may be present or indicate a representative to be present.

The proceedings carried out by the Authority after it has opened an inquiry must ensure that the parties involved are given a hearing and comply with the other principles of the adversarial system.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

Abuse of dominance is considered a quasi-criminal minor offence. The application of general criminal law can only derive from behaviour also corresponding to a penal offence (fraud, extortion, etc) as there are no criminal sanctions for competition law offences.

In relation to sanctions for quasi-criminal minor offences, fines can be imposed of up to 10 per cent of the corresponding turnover in the year immediately preceding that of the final decision adopted by the Authority for each of the infringing undertakings, or, in the case of associations of undertakings, of the aggregated turnover of the associated undertakings:

• for infringements of article 11 of the Act or article 102 of the TFEU;
• for non-compliance with the conditions attached to the decision of closing the case at the end of the investigation phase;
• for the non-compliance with behavioural or structural remedies imposed by the Authority; or
• for non-compliance with a decision ordering interim measures.

The Authority published Guidelines on the methodology to use in the application of fines, dated 7 August 2012, according to which the Authority takes into account the value of the undertaking’s sales of goods or services to which the infringement directly or indirectly relates (similarly to the European Commission’s Guidelines on the method of setting fines imposed pursuant to article 23(2)(a) of Regulation No. 1/2003 (2006/C 210/02)), or the total turnover when the calculation of the turnover related to the infringement is impossible to determine.

In the case of any of these infringements being carried out by individuals held responsible under the Act the applicable fine cannot exceed 10 per cent of the corresponding remuneration in the last full year in which the infringement took place.

In addition, the refusal to provide information or the provision of false, inaccurate or incomplete information, or non-cooperation with the Authority are subject to fines of up to 1 per cent of the corresponding turnover in the year immediately preceding that of the final decision adopted by the Authority, for each of the infringing undertakings, or, in the case of associations of undertakings, of the aggregated turnover of the associated undertakings. In the case of any of these infringements being carried out by individuals held responsible under the Act the applicable fine ranges from 10 to 50 units of account (each unit of account at present amounting to €102).

Further, the absence of a complainant, of a witness or of an expert to a duly notified procedural act is punishable with a fine ranging from 2 to 10 units of account.

Additionally, should the infringement be considered sufficiently serious, the Authority can impose, as ancillary sanctions, the publication, at the offender’s expense, of an extract of the sanctioning decision in the Official Gazette and in a Portuguese newspaper with national, regional or local coverage, depending on the relevant geographical market, or, in the case of competition law infringements carried out during, or because of, public procurement proceedings, the prohibition for a maximum of two years from participating in proceedings for entering into public works contracts for concessions of public works or public services for the lease or acquisition of goods or services by the state or for the granting of public licences or authorisations.

The Authority may further impose periodic penalty payments of up to 5 per cent of the average daily turnover in the year immediately preceding that of the final decision, per day of delay, counted from the date established in the notification, where the undertakings do not comply with an Authority decision imposing a sanction or ordering the adoption of certain measures.

Individuals, legal persons (regardless of the regularity of their incorporation), companies and associations without legal personality may be held liable for offences under the Act.

Legal persons and equivalent entities are liable when the acts are carried out on their behalf, on their account by persons holding leading positions (eg, the members of the corporate bodies and representatives of the legal entity), or by individuals acting under the authority of such persons by virtue of the violation of surveillance or control duties. Merger, demerger or transformation of the legal entity does not extinguish its liability.

The members of the board of directors of the legal entities, as well as the individuals responsible for the direction or surveillance of the area of activity in which an infringement is carried out are also liable when holding leading positions they act on behalf or on the account of the legal entity, or knowing or having the obligation to know the infringement they do not adopt the measures required to put an end to it, unless a more serious sanction may be imposed by other legal provision.

Undertakings whose representatives were, at the time of the infringement, members of the directive bodies of an association that is subject to a fine or a periodic penalty payment are jointly and severally responsible for paying the fine, unless they have expressed in writing their opposition to the infringement.

Further, the Authority’s decisions declaring the existence of a restrictive practice may include the admonition or the application of other fines and other sanctions set forth in the Act and, if required, the imposition of behavioural or structural remedies indispensable to put an end to the restrictive practice or to the effects thereof. Structural remedies may only be imposed in the absence of a behavioural remedy that is equally effective, or, if such remedy exists, it is more costly to the concerned undertaking than the structural remedy.

In addition, the Authority may, at any time during the proceedings, order the suspension of a restrictive practice or impose other interim measures required to restore competition, or indispensable to the effectiveness of the final decision to be adopted, if the findings indicate that the practice in question is about to cause serious damage, irreparable or difficult to repair damage. The interim measures may be adopted by the Authority ex officio or upon request by any interested party and shall be effective until they are revoked and for a period of up to 90 days, extendable for equal periods within the time limits of the proceedings. Imposition of interim measures is subject to a prior hearing of the concerned undertaking, except if such a hearing puts at risk the effectiveness of the measures, in which case the concerned undertaking is heard after the measure is adopted. Whenever a market subject to sectoral regulation is concerned, the opinion of the corresponding sectoral regulator shall be requested.

As noted above, the Authority has published Guidelines on the methodology to use in the application of fines. In drafting these guidelines the Authority has taken into account the European Commission’s Guidelines on the method of setting fines imposed pursuant to article 23(2)(a) of Regulation No. 1/2003, also referred to above. While the Authority’s guidelines largely reflect those adopted by the European Commission in respect of the method for the setting of fines, they include, nevertheless, specific provisions resulting from the application of the general regime on quasi-criminal minor offences, which applies, on a subsidiary basis, to the administrative procedure on anticompetitive agreements, decisions and practices (see question 1). For instance, where the economic benefit obtained from the infringement may be established and exceeds the maximum limit of the applicable fine the Authority may impose a fine up to such benefit as long as the applicable fine does not exceed the said maximum limit by more than a third; in the case of several infringements, the applicable fine cannot exceed the double of the higher limit applicable to the infringements at issue; in the case of negligence, the amount of the applicable fine is reduced by half.

The highest fine ever imposed was the one levied on the PT Group and the ZON Group, in which the Authority fined the said groups an aggregate amount of €53.062 million (€45.016 million on the PT Group and €8.046 million on the ZON Group), for abuse of a dominant position between 22 May 2002 and 30 June 2003 in the wholesale and retail broadband access markets. The sanctioned abusive practices included retail margin squeeze, discriminatory conditions regarding equivalent services and limiting production, distribution, technical development and investment in respect of the services concerned. This decision was revoked by the Lisbon Court of Commerce on 4 October 2011, which, on the grounds of the applicable statute of limitations acquitted the defendants.

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

Competition enforcers impose sanctions directly (see questions 26 and 27).

What is the recent enforcement record in your jurisdiction?

Under both the former Competition Act and the Act, and although several investigations into reported abuses of dominance have been carried out or are at present under way, only seven condemning decisions have so far been adopted by the Authority.

The first three cases involved the Portugal Telecom (PT) Group, the then telecoms incumbent in Portugal: in the first case in 2007, the Authority fined PT Comunicações, a subsidiary of Portugal Telecom, €38 million for refusal of access to its underground conduits network to competitors Tvtel and Cabovisão, a decision that was annulled by the Lisbon Court of Commerce on 2 March 2010, this annulment having been confirmed by the Appellate Court of Lisbon. The second decision fined PT Comunicações €2.1 million in 2008 for abuse of a dominant position in the wholesale markets for the lease of communication circuits, a decision that was revoked by the Lisbon Court of Commerce on 29 February 2012, which acquitted PT. The Authority appealed this latter decision to the Appellate Court of Lisbon, but in any case the statute of limitations has meanwhile expired. The third decision fined the PT Group and the ZON Group an aggregate amount of €53.062 million (with a €45.016 million fine on the PT Group and a €8.046 million fine on the ZON Group) for abuse of a dominant position between 22 May 2002 and 30 June 2003 in the wholesale and retail broadband access markets, a decision that was revoked by the Lisbon Court of Commerce on 4 October 2011, which acquitted the defendants.

In addition, on 12 April 2012, the Authority imposed on Roche Farmacêutica, a local subsidiary of Roche, a fine of €900,000 for abuse of a dominant position related to a discount system applied by Roche to public hospitals within public tenders’ proceedings in 2006.

Further, in a decision announced on 18 May 2010, the Authority fined the Portuguese Association of Chartered Accountants (OTOC) €229,300 for adopting anticompetitive practices in the market of mandatory training for chartered accountants, a decision that was partially confirmed by the Lisbon Court of Commerce, which lowered the fine to €90,000. A subsequent appeal has been lodged by the OTOC with the Appellate Court of Lisbon, which confirmed the Lisbon Court of Commerce’s decision.

Subsequently, on 20 June 2013, the Authority imposed on Sport TV Portugal a fine of €3.73 million for abuse of a dominant position in the national market for television channels of conditioned access with premium sport content, a fine that the Competition, Regulation and Supervision Court (the Specialist Court) decreased to €2.7 million. This latter decision has been confirmed by the Appellate Court of Lisbon.

Finally, in a decision of 22 December 2015, the Authority imposed on the National Association of Pharmacies (ANF) and on three companies of the same group (Farminveste SGPS, Farminveste - Investimentos, Participações, Gestão, SA and HMR - Health Market Research, Lda) a fine in the aggregate amount of €10.34 million for abuse of dominant position (margin squeeze) on the market for studies based on pharmacies’ data. Following an appeal lodged by ANF the Specialist Court lowered the fine to circa €7 million, a decision that ANF appealed to the Appellate Court of Lisbon, which lowered further the fine to €815 thousand.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

Contractual clauses that substantiate or have as an effect practices prohibited by the Act are null and void as a result of their being contrary to the law, according to article 280(1) of the Civil Code. In principle, this merely involves the nullity of the specific clause in the contract and not of the whole contract, unless, as per article 292 of the Civil Code, it is proved that the parties would not have entered into the contract without the invalid clause.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Private enforcement is governed by the Private Enforcement Act (see question 1), which transposed Directive 2014/104/EU.

Under the Private Enforcement Act an undertaking or association of undertakings that have infringed competition law provisions, including those governing the abuse of a dominant position, is obliged to fully indemnify the injured parties for the damage arising out of the infringement, under the terms set forth in article 483 of the Portuguese Civil Code, which sets out the general tort liability requirements: the finding of blameful or negligent illicit behaviour, proof of injury to the claimant and the demonstration of a causal link between the illicit conduct and the damage.

Any injured party has individual standing. Class actions, whereby individual litigants or associations may, under certain conditions, sue in representation of injured parties, are provided for in Law No. 83/95 of 31 August 1995 and under the Private Enforcement Act may be brought to claim damages for competition law infringements.

As for the possibility of a dominant firm being ordered to grant access, supply goods or services or conclude a contract, as stated in question 27, the Authority’s decisions declaring the existence of a restrictive practice may include the admonition or the application of other fines and other sanctions set forth in the Act and, if required, the imposition of behavioural or structural remedies to put an end to the restrictive practice or to the effects thereof. Structural remedies may only be imposed in the absence of a behavioural remedy that is equally effective, or, if such remedy exists, it is more costly to the concerned undertaking than the structural remedy. As regards courts, although they may adopt decisions whereby a party is ordered to refrain from practices prohibited by law, such as an abuse, we are of the opinion that, under the Portuguese legal system, within the framework of the Act they cannot impose obligations on a specific contract.

As stated above (see question 30), contractual clauses that substantiate or have as an effect practices prohibited by the Act are null and void as a result of their being contrary to the law, according to article 280(1) of the Civil Code. This nullity may be declared ex officio by the court.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

Claims are adjudicated by the courts. The award of damages aims to restore the situation that would have existed if the infringement to competition law had not occurred. The compensation shall cover the damage caused as well as the benefits that the injured party could not obtain because of the infringement, calculated as of the moment at which the damage was caused. Late payment interest shall accrue from the decision that awards the damages until effective and full payment.

As specifically regards private enforcement actions, the Private Enforcement Act stipulates that in the cases where the defendant invokes passing on it bears the burden of proof. Whenever the claim is brought by an indirect customer who bore additional costs passed on, the burden of proof regarding this passing on and its scope lies on the claimant or indirect customer. Additional costs are presumed to have been passed on to an indirect customer whenever this latter demonstrates that the defendant infringed competition law, the infringement raised additional costs to the direct customer and the claimant has acquired the goods or services affected by the infringement or products or services derived from those affected by the infringement or incorporating the latter. These rules apply mutatis mutandis to the cases where the claimant is a supplier of the defendant.

To what court may authority decisions finding an abuse be appealed?

Law No. 46/2011 of 24 June determined the creation of the Specialist Court to handle competition, regulation and supervision matters, as of 30 March 2012. The new Specialist Court is now the exclusive first instance for review of all the decisions adopted by the Authority.

Under the current regime, the Authority’s sanctioning decisions (typically involving anticompetitive agreements, decisions and practices, abuses of economic power and infringements of the merger control rules) may be appealed to the Specialist Court under the rules established in the Act and, on a subsidiary basis, under the quasi--criminal minor offences regime. The appeal shall not suspend the effects of the Authority’s decision, except for decisions that impose structural remedies as established in the Act. Appeals that refer to decisions applying fines or other penalties may suspend the enforcement of such decisions only if the party concerned requests it on the basis of the allegation that the enforcement of the decision may cause it considerable harm and if such party offers a guarantee, and provided such guarantee is submitted within the time limit set by the court. The Specialist Court shall have full jurisdiction in the case of appeals lodged against decisions imposing a fine or a periodic penalty payment, and can reduce or increase the corresponding amounts.

Appeals of decisions of the Specialist Court that may be appealed are filed with the Appellate Court of Lisbon as a court of last resort.

The Specialist Court is also competent to handle indemnification actions exclusively grounded competition law infringements. This court’s rulings on these matters are subject to review by the Appellate Court of Lisbon, the decisions of which, though limited to matters of law (except when the assessment of the evidence or the determination of the facts proved violates an express provision that requires a certain type of evidence for certain facts or that establishes the effects of certain types of evidence), may be appealed to the Supreme Court of Justice. Appeals of the decisions in question that exclusively involve matters of law may under certain circumstances be lodged directly with the Supreme Court of Justice.